“Orders for durable goods rose 0.8% in September, the
government said Thursday, boosted by a sharp
increase in orders for defense goods, which offset a fall in civilian aircraft
orders…The headline was stronger than the details of the report. Orders for
core capital goods, closely watched by economists, fell 0.1%.” Story at…
JOBLESS CLAIMS (Reuters)
“New applications for U.S. unemployment aid rose last
week, but the number of Americans receiving benefits fell to more than a
45-year low, pointing to tightening labor market conditions.” Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 1.9% to 2706.
-VIX dropped about 4% to 24.22. (This wasn’t a big drop
for todays big day for stocks. The Options
Boys aren’t convinced the correction is over yet.)
-The yield on the 10-year Treasury rose to 3.123% as of 4:54
pm.
Raymond James had a piece years ago where they described
a “selling stampede” as a 17 to 25-day period where the market falls nearly
every day with occasional 1-1/2 to 3-day rallies before the stampede ends to
the downside. That pretty well describes the current downturn that has lasted
24-days as of Thursday. The catch is we don’t know yet if the selling has
ended.
Bottoms often have a few days of big back and forth moves,
up and down, so we can’t really call a bottom here. For my analysis we would
need a retest of the low, but we can say that it looks like we may have made a bottom based on the
timing (as described in the Raymond James comment) and the near straight down
move that sometimes is called a waterfall drop. This time there was a good
bounce of about 2% in the middle of the drop, so we may not have had a pure
waterfall event, but the number of days down is high enough for us to lean
bullish. The odds are that we’ve made a short-term bottom, but we’ll need a
retest to confirm it.
Today is trading day 25 for this pullback. The drop is
now 7.7% (9.4% max). Over the last 10-years, for drops less than 10%, the
average time from top to bottom has been 32-days to a final bottom, including a
retest. (The low is usually at the retest.) Except for major crashes, the
average correction was about 12% and lasted 53 trading-days including retests.
Today was a statistically-significant, up-day. That just means that the price-volume move up
exceeded statistical parameters that I track. The stats show that about 60% of
the time a statistically significant move up will be followed by a down-day the
next day. If we can make another positive day tomorrow (Friday) I’ll feel
better that we may have seen to lows or be near the lows.
As noted yesterday: My inclination is to take a
conservative, protect the portfolio position and cut back on stocks. One can
make a case for cutting stocks now or waiting for a bounce. The averages and
technicals suggest that this correction is almost over so waiting seems
reasonable. The other option, cutting stock holdings now, saves potential
losses, but will be disappointing if the market continues to bounce up. Either
way, without a successful test of the prior low, we can’t call an end to this
retreat.
The S&P 500 is now 2.2% below the 200-dMA (2768). That
will be a point of resistance. Its
possible the Index could claw back to prior highs, but who knows at this point.
A 50% retracement is around 2800 so that would be another point we’ll watch. That
is a bit below the 100-dMA (2825).
MOMENTUM ANALYSIS:
(Momentum analysis is not useful in a selloff. As an example,
Proctor and Gamble was 16th last week – now because of a flight to
safety - it is #1. If the downturn ends,
it will drop quickly again.)
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the
4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF)
outperformed the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked
in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.)
XLK was up 35% on the year while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
Neutral, but it showed an improvement in several categories of internals.
Market Internals are a decent trend-following analysis of
current market action but should not be used alone for short term trading. They
are usually right, but they are often late.
They are most useful when they diverge from the Index. In 2014, using these internals alone would
have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on
Negative – no shorting).
I am now 50% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio. As a retiree, this is a position with which
I am comfortable unless I am in full defense mode or feeling especially
optimistic.
INTERMEDIATE / LONG-TERM INDICATOR - HOLD
Thursday, the Price
indicator was positive; Sentiment & Volume were neutral; the VIX indicator
was negative. Overall this is a NEUTRAL indication.
